U.S. v. Brown

595 F.3d 498

UNITED STATES of America v. Franklin C. BROWN, Appellant.

No. 04-4164.

No. 05-3879.

No. 08-1569.

United States Court of Appeals, Third Circuit.

Argued December 16, 2009.

Filed: February 23, 2010.

Nathan Dershowitz (argued), Amy Adelson, Dershowitz, Eiger & Adelson, New York, NY, Peter Goldberger (argued), Pamela A. Wilk, Ardmore, PA, for Appellant.

Martin C. Carlson, United States Attorney, Kim Douglas Daniel (argued), Assistant United States Attorney, Harrisburg, PA, for Appellee.

Before: SLOVITER, JORDAN, and GREENBERG, Circuit Judges.

OPINION OF THE COURT

GREENBERG, Circuit Judge.

  I. INTRODUCTION ........................................................  502
 II. BACKGROUND ..........................................................  502
III. JURISDICTION ........................................................  504
IV. DISCUSSION ...........................................................  504
    A. The Rule 33 Motion ................................................  504
       1. The Receipt of the Noonan Tapes ................................  504
       2. Allen's Preliminary Report .....................................  505
       3. The Evidence at Trial ..........................................  506
       4. Owen's Report ..................................................  506
       5. The Motion under the All-Writs Act .............................  507
       6. The Initial Motion for a New Trial .............................  507
       7. The Renewed Motion for a New Trial .............................  508
       8. The District Court Did Not Abuse its Discretion ................  511
    B. The Pre-Trial Suppression Motion ..................................  514
    C. The Plea Agreement ................................................  517
       1. The Terms of the Agreement .....................................  517

       2. Judge Rambo's Letter ...........................................  517
       3. The Chambers Meeting ...........................................  518
       4. Application of Rule 11(c)(1) ...................................  519
       5. Abuse of Discretion Standard ...................................  521
    D. The Sentence ......................................................  523
       1. The Sentencing Proceedings .....................................  523
       2. Post-Booker Sentencing Requirements ............................  526
       3. Unreasonableness of Sentence ...................................  526
V. CONCLUSION ............................................................  527

I. INTRODUCTION

This matter comes on before this Court on Franklin Brown's consolidated appeals from: (1) a judgment of conviction and sentence entered by the District Court on October 15, 2004, reflecting the sentence the Court imposed on October 14, 2004; (2) an order denying Brown's motion for a new trial entered by the District Court on August 10, 2005; and (3) an order denying Brown's renewed motion for a new trial or for dismissal of the indictment entered by the District Court on February 22, 2008. For the reasons that follow, we will affirm the judgment of conviction and the orders denying Brown's motion for a new trial or dismissal of the indictment, but will remand the case for Brown's resentencing in light of United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005).

II. BACKGROUND

Brown worked for the Rite Aid Corporation, the operator of a chain of retail drug stores, for more than 30 years, eventually rising to become one of its top executive officers, before resigning in 2000. From 1995 until 1999, while Brown was serving as Rite Aid's Chief Legal Counsel and then as a Vice Chairman of its Board of Directors, Martin Grass was Rite Aid's Chief Executive Officer. Under Grass's leadership, Rite Aid aggressively expanded its operations by acquiring and building hundreds of drugstores throughout the United States. This expansion seemingly was rewarded with soaring profits, and Rite Aid's stock price rose by more than 300% between the date that Grass assumed control of the company and the beginning of 1999.

Troubles within Rite Aid surfaced, however, when it released a statement in March 1999 revealing significantly lower than expected earnings and higher than expected expenses, resulting in its stock losing more than half of its value in a single day. After the value of Rite Aid stock continued to slide over the next several months, the Rite Aid Board of Directors on October 18, 1999, issued a press release announcing that Grass was resigning as CEO and that Rite Aid intended to restate its income negatively for fiscal years 1997-1999. Rite Aid's new leadership then launched an internal investigation that culminated on July 11, 2000, in a restatement of income of more than one billion dollars for fiscal years 1998, 1999, and the first quarter of fiscal year 2000.¹ When Rite Aid made the July 11, 2000 restatement it was the largest restatement of corporate income in United States history.

The Rite Aid problems naturally triggered public investigations. Thus, the Securities & Exchange Commission commenced a civil probe into Rite Aid's accounting practices and the Federal Bureau of Investigation, in conjunction with the United States Attorney's Office for the Middle District of Pennsylvania launched a criminal investigation. FBI agent George Delaney and Assistant United States Attorney ("AUSA") Kim Douglas Daniel led the criminal investigation.

As the criminal investigation progressed, Brown retained counsel and notified the government of this representation. On February 12, 2001, AUSA Daniel contacted Brown's counsel and arranged a meeting between government representatives and Brown for April 4, 2001. On March 28, 2001, AUSA Daniel faxed Brown's counsel an agenda letter setting forth the topics to be discussed at the April 4 meeting. Brown, however, became unwilling to meet with the government, a change in position that led Brown's counsel on or about March 30, 2001, to inform AUSA Daniel that Brown would not consent to participate in the interview.

During the time that the government was communicating with Brown, it also was in contact with Timothy Noonan, Rite Aid's President and Chief Operating Officer during Grass's tenure as CEO. Noonan informed the government that, in response to Brown's request, he had agreed to meet Brown on March 13, 2001. Noonan agreed to act as a confidential informant for the government and surreptitiously record his conversation with Brown. Agent Delaney instructed Noonan to steer the conversation towards the topics listed in the agenda letter that AUSA Daniel had sent to Brown's counsel. Noonan attached a hidden microphone to his body, met with Brown as planned, and recorded their conversation. Pursuant to Noonan's request, Brown and Noonan met again on March 30, 2001, and Noonan again recorded their conversation. In order to focus the conversation on topics related to the government's investigation, Noonan brought a letter addressed to Noonan's counsel signed by AUSA Daniel to the March 30 meeting. The government created the letter solely for use at that meeting and it purported to set forth a discussion agenda for an upcoming meeting between Noonan and the government. This fictitious letter listed topics of discussion similar to those in the letter that AUSA Daniel had sent to Brown on March 28, 2001.

Noonan also recorded conversations with Brown on April 1, 2001, April 27, 2001, and May 21, 2001, as well as his conversation with Grass and Brown on May 2, 2001. Furthermore, an FBI surveillance team made video tape recordings of each of Noonan's conversations with Brown during this period except for that on April 27.

On June 21, 2002, a grand jury in the Middle District of Pennsylvania returned a multi-count indictment against Grass, Brown, Franklyn Bergonzi, and Eric Sorkin arising from the Rite Aid investigation. Bergonzi and Sorkin, respectively, had served as Rite Aid's Chief Financial Officer and Vice President in Charge of Pharma Purchasing. The indictment charged Brown with numerous counts of conspiracy, fraud, making false statements to the SEC, obstruction of justice, and witness tampering.

Brown was convicted at an ensuing jury trial of conspiracy to commit accounting fraud, filing false statements with the SEC, conspiracy to obstruct justice, obstruction of grand jury proceedings, obstruction of government agency proceedings, and witness tampering. In particular, the jury found that Brown had conspired to inflate Rite Aid's reported earnings for fiscal year 1999, had conspired to create backdated severance letters awarding Brown and other executives millions of dollars in compensation, and had interfered with the government's investigation of Rite Aid in a variety of ways. The District Court sentenced Brown to ten years in prison followed by two years of supervised release. Brown has surrendered to the Bureau of Prisons and presently is incarcerated.²

III. JURISDICTION

The District Court had jurisdiction over this federal criminal action pursuant to 18 U.S.C. § 3231, and we have jurisdiction to review the judgment of conviction and sentence pursuant to 28 U.S.C. § 1291 and 18 U.S.C. § 3742.

IV. DISCUSSION

On this appeal, Brown puts forward a panoply of reasons that he claims require us either to dismiss his indictment, grant him a new trial, or remand his case to the District Court for resentencing though, interestingly, he does not suggest that the evidence at the trial was insufficient to support his convictions. Specifically, Brown maintains that the District Court: (1) abused its discretion when it denied his Rule 33 motion based on newly discovered evidence; (2) improperly denied his pre-trial suppression motion; (3) abused its discretion and committed plain error by interfering in the plea negotiation process; and (4) abused its sentencing discretion in a...